Current account deficit soars in H1 as trade gap widens

Greece’s current account deficit widened by 6,344 million euros in the first half of the year over the same period of 2005, reaching 14,277 million, according to data published by the Bank of Greece yesterday. The development reflected mainly a rise in the trade deficit and, to a much lesser extent, an increase in the income account deficit and a narrowing of the services surplus. The current transfers surplus also recorded a decrease, albeit small. The overall trade deficit (including oil and ships) showed an increase of 4,623 million euros, which almost equally stemmed from rises in the deficit, excluding oil and ships, in the net oil import bill and in net payments for purchases of ships. Receipts from goods exports (excluding oil and ships) showed a remarkable rise (of 666 million euros, or 13.5 percent), which, however, was more than offset by a hike (of 2,321 million euros or 15.5 percent) in the corresponding import bill. The services surplus narrowed by 683 million euros, mainly as a result of a 546-million-euro drop in net transport receipts (because transport receipts declined by 82 million while transport payments increased by 464 million) and, secondarily, a 284-million-euro rise in net payments for «other» services. By contrast, net travel receipts grew by 146 million (as receipts rose by 99 million euros and payments declined by 47 million euros). The income account deficit grew by 1,004 million euros, almost exclusively owing to higher net interest, dividend and profit payments. The widening of the deficit is mainly accounted for by an increase in net interest payments as a result of a continuing rise in non-residents’ holdings of old and new issues of Greek government bonds. Finally, the current transfers surplus narrowed slightly (by 34 million), as the decrease in net (mainly EU) current transfers to general government more than offset a rise in net current transfers to the other sectors (excluding general government). Capital transfers balance In January-June 2006, the capital transfers balance showed a surplus of 1,508 million euros, 461 million higher than in the same period of 2005. This reflects almost exclusively a rise in EU capital transfers to general government. Overall, in January-June 2006, the combined current account and capital transfers balances showed a combined deficit of 12,769 million euros, compared with 6,885 million euros in the same period of 2005.

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